Benchmarks tumble on across the board selling

Local equity markets, though have pared some of their losses, were seen trading in the red due to heavy selling across the board amid mounting worries about an imminent hike in interest rates and the likely impact on economic growth. The jittery in local markets were mainly due to domestic reasons as Asian markets were trading mixed, though US index futures were showing slight up-tick in screen trade. On the sectoral front, all the sectoral indices, with an exception of Bankex, are trading in the negative territory and Metal segment is leading the pack of losers followed by Auto, Consumer Durables and Technology counters. Index heavyweights such as RIL and Infosys have lost more than one percent in trade today at this point of time. Besides large cap stocks, scores of midcap and smallcap stocks too have declined sharply on selling pressure and BSE Mid-cap and Small-cap indices have lost around 1.03% and 1.18%, respectively. The market breadth on the BSE was extremely negative in the ratio of 1935:824 while 88 scrips remained unchanged. Meanwhile, corporate earnings announcement for December 2010, which will start from the second week of January 2011, will set the direction for the market in the near term.

The BSE Sensex lost 169.68 points or 0.84% at 20,015.06. The index touched a high and a low of 20,210.62 and 19,951.48, respectively.

The BSE Mid-cap and Small-cap indices shed 1.03% and 1.18%, respectively.

All the sectoral indices with an exception of Bankex, which was up 0.06%, were trading in the negative territory. Metal was down 2.08%, Auto was down 1.97%, Consumer Durables (CD) down 1.64%, TECk was down 1.07% and Information Technology (IT) down 0.98% were the major losers in the BSE sectoral space.

Meanwhile, the divestment drive of the government is all set to speed up in the last quarter of the current financial year with the department of disinvestment lining a number of central public sector units (PSUs) for stake sale over next three months. These include oil major ONGC, steel major SAIL and the Hindustan Copper. 

'SAIL FPO (will come) in February. ONGC will also come this fiscal. We are also looking at Hindustan Copper. It may come this fiscal,' disinvestment secretary Sumit Bose said while talking to media persons on the sidelines of a conference in New Delhi. He added that the government was on track to achieve the Rs 40,000 crore budgeted target for the financial year 2010-11.

So far the government has earned around Rs 22,000 crore in the current fiscal by selling minority stakes in a number of PSUs including the Coal India, Sutlej Jal Vidyut Nigam (SJVNL), Engineers India and Shipping Corporation of India. It has also cleared the stake sales in ONGC and SAIL. In case of ONGC, the government will sell 5% of stake at around Rs 13,000 crore. In case of SAIL, the divestment will happen in two stages with the government raising Rs 4,000 crore in the first stage by offloading 5% of its equity.

Further, while the process of divesting sovereign stake in the Power Finance Corporation (PFC) has already started, the secretary hinted that this may be implemented only in the next fiscal. The department of disinvestment has also dropped the plans for divesting stake in Indian Oil for now because of surging crude prices and as a result rising under-recoveries of oil companies, but it would be pursued next fiscal if under-recoveries come down.

The top gainers on the Sensex were RCom up 1.96%, ICICI Bank up 1.79%, Cipla up 0.89%, Reliance Infra up 0.70% and SBI up 0.26%.

Hindalco Inds down 5.10%, M&M down 3.17%, Tata Motors down 2.66%, Bharti Airtel down 2.34% and HDFC Bank down 1.54%, were the top losers on the index.

Union finance minister Pranab Mukherjee said on Thursday that the sticky food inflation was because of rising demand for primary commodities amidst increasing incomes as well as problems in supply chain management. While demand cannot be lowered and supply increase will only be gradual, supply chains can be managed well to increase their efficiency, he said.

Mukherjee has in this wake asked the state governments to urgently look into the supply management of items that are driving the current round of food inflation in the economy, in particular looking at the local factors that are widening the gap between the wholesale and retail prices. State governments need to ensure that all bottlenecks in the supply chain are removed, said Mukherjee.

The finance minister while reacting to the recent figures of food inflation which have shown a surge in the last few weeks and touched 18.32% for the week ending December 25, 2010 said that it was a matter of worry and more steps will be taken to bring down prices. Food inflation for the week ending December 25 was more than doubled from its level of 8.6% on November 20, 2010.

Mukherjee argued that that much of this inflation has been due to significant increase in the prices of a few primary items like fruits and vegetables, milk, meat, poultry, eggs and fish. He said that in fact, in the week for which the data has been released today, three-fourths of food inflation is explained by inflation in vegetables, and nearly one-fourth is explained by inflation in milk. While there are some weather induced supply constraints on some of these items, which go against the seasonal decline normally seen at this time of the year, a large part of price rise is due to widening gap between the wholesale and retail prices and the growing demand for these products due to rising income levels.

The S&P CNX Nifty trimmed 52 points or 0.86% to 5996.25. The index touched a high and a low of 6051.20 and 5976.50, respectively. 

The top gainers on the Nifty were Sun Pharma up 2.11%, RCom up 2.08%, ICICI Bank up 1.76%, IDFC up 1.52% and Cairn India up 0.83%.

The top losers on the index were Hindalco Inds down 5.39%, M&M down 3.40%, Sesa Goa down 2.99%, Tata Motors down 2.93% and SAIL down 2.92%.

Other Asian markets are trading mixed at this point of time. Shanghai Composite gained 0.52%, KLSE Composite rose 0.14%, Nikkei 225 increased 0.11% and Seoul Composite added 0.41%.

On the flip side, Hang Seng shed 0.40%, Jakarta Composite declined 2.92%, Straits Times decreased 0.53% and Taiwan Weighted trimmed 1.13%.

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